Highlights

  • The SMSF wind-up date is the day the fund holds no assets, not the date of trustee decisions or member exits.
  • The final annual return covers the period from 1 July to the wind-up date, even if that is mid-financial year.
  • The supervisory levy is adjusted on a pro-rata basis to reflect the shortened period of the fund's operation.
  • The fund bank account must remain open until all tax refunds from the ATO have been received.

Winding up an SMSF during the financial year rather than at year end requires careful attention to dates and sequencing. The wind-up date, the final return period, and the bank account closure all follow rules that catch some trustees off guard, particularly when members are in pension phase.

Defining the Wind-Up Date

The wind-up date for an SMSF is the day on which the fund holds no assets. This is not the date on which trustees decide to wind up, nor is it the date that members' benefits are paid. The fund continues to exist until the last asset leaves. The final return covers the period from 1 July of the relevant financial year through to this wind-up date.

Data on SMSF wind-ups shows that approximately 46% of wind-ups that occurred in 2017-18 took place in the June quarter, suggesting many trustees time the closure to coincide with year end. Those who wind up mid-year face a shorter return period and a pro-rata levy calculation.

The Supervisory Levy Adjustment

When a fund winds up during the year, the supervisory levy is adjusted on a pro-rata basis. The standard annual levy is $259. A fund that winds up on 31 December, having operated for exactly half the financial year, would pay approximately half that amount. The adjustment is calculated through the final return.

The fund must also notify the ATO of certain changes within 28 days. These include changes in trustee, changes in fund structure, and the winding up itself. Missing these notification windows can create complications in the ATO's records and affect the timely processing of the final return.

Pension Minimum and Bank Account

If a member is in pension phase at the time of wind-up, the pro-rata minimum pension payment for the period must be paid before the pension is commuted. Failing to pay the minimum before commutation could give rise to a minimum pension shortfall for that year.

The fund bank account must remain open after all assets are transferred out. The ATO may issue a refund of excess levy or other amounts after the final return is lodged and processed. Closing the account before receiving these refunds creates a practical difficulty in recovering funds. Trustees should delay closing the bank account until all ATO correspondence and payments have cleared.